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the managing director and head o BNRI,

Mark Brown said that Barclays Bank had

interests in oil and gas in the North Sea,

Central Europe, India and Kazakhstan and

urther pursuits in mining in South Arica

and Sub Saharan Arica, as well as coal in

Colombia, it was easy to appreciate why the

bank chose Doha as a location to set up shop.

I youre looking or a town which is aggre-

gately closer to these markets than Doha,

then Barclays might be interested in talking

to you.

Brown was speaking last year at the an-nouncement o Qatars QR 910 million

($250 million) investment deal with the

global private equity business, which is a

division o Barclays Bank. The new oce is

under the umbrella o the QFCA. The part-

nership is seen as an important milestone in

Qatars strategy o developing an asset man-

agement hub and promoting the expansion

o its nancial services industry, as the state

tries to scale up the amount o assets under

management in the country to QR546 bil-

lion 910 billion ($150-$200 billion) by 2020.

Qatar is ast becoming an attractive place

to do business and the QFCAs mandate is to

make it as hospitable as possible. Its currentocus is on the creation o a global business

hub or three core markets - Asset Manage-

ment, Reinsurance and Captive Insurance.

QFC Authoritys Chie Executive Ocer,

Shashank Srivastava explains why the coun-

try is such a hotbed or asset management

companies at the moment.

There are a number o trends playing

out, says Srivastava. One is that the as-

set management rms needs to be closer to

their clients. Ater the nancial crisis, they

need to be able to demonstrate that they can

do a better job, not only perorming their

task, but also in risk management. Theyneed to show their client that they have ro-

bust systems in place, that they have a long-

term understanding o their clients invest-

ment needs, and this can only really be done

on the ground.

Another driver is that the investors are

also demanding this. They want them near-

by to monitor and supervise them properly.

They want to be able to communicate their

needs, he added.

The third reason is the geographical el-

ement. Qatar is right in the oyer o the

worlds hottest markets right now. Histori-

cally, the majority o the regional wealth had

been invested in the west, but the high yieldssimply arent there anymore. You get high-

quality purchases and cheap valuations, but

theres no growth there. So whether you

are hunting or yield or growth, Srivastava

maintains that you need to look outside

these traditional western marketplaces and

into Asia or the emerging markets or high

yields and growth.

Away rom investments and relation-

ship building, Srivastava continues, we

now have the correct legal regulatory tax

environment or asset management compa-

nies to actually establish themselves on the

ground. So you might have all these globaltrends playing out, but i the environment is

not there or them to establish themselves,

then what can they do? Tax wise, its a great

location or asset management rms to op-

erate in as the QFC environment only taxes

locally-sourced prots, so internationally-

sourced prots are not taxed.

Reinsurance

The QFCA is bullish about the outlook or

reinsurance in Qatar and the region in gen-

eral. So much so that its the cornerstone o

In the

mIddleof everywhere

when

Why is Qatar attracting the attention of asset manage-

ment companies? the Qatar financial center authority(Qfca) got its seeding programme off the ground in 2012

Which facilitated the regional ambitions of tWo asset

management firms and there are more to come this year.

RoRy Coenspoke to shashank srivastava, the neW ceo of

the Qfca, to analyse the authoritys recent direction.

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their core strategy. Low insurance premium

penetration rates, coupled with high ces-

sion rates to international reinsurers, sug-

gest the potential o the industry to grow

signicantly over the next ew years. In

2011, hal o the insurance that was written

was reinsured abroad, with the global aver-

age being 12%; while the insurance penetra-tion rate - the percentage o total insurance

premiums in comparison to gross domestic

product - was at about 1% in 2011, while the

global average was almost 7%. Shashank

says: In general, reinsurance underpins

economic growth because it helps primary

insurance companies to prosper and pro-

vides risk protection to households and

rms alike. As a consequence, reinsurance

usually grows in line with the underlying

primary markets.

For Qatar we expect a rapid expansion o

the primary markets due to strong growthin commercial lines on the back o unabated

momentum in inrastructure and construc-

tion investments. In addition, the indus-

try is to benet rom continued growth in

personal lines such as motor, homeown-

ers, health and lie. We are witnessing an

increasing interest rom reinsurers who

are considering a local presence in the Gul

region. As o now Q-Re, SEIB and Chedid

Capital Holding are reinsurers licensed in

Qatar and we are condent to see more es-

tablishments in the not too distant uture as

many leading primary insurers such as AXA

and Zurich as well as brokers like Aon andMarsh have already set up a presence in this

country.

Cession rates are comparatively high

in Qatar or two simple reasons: rstly,

the country boasts a number o huge and

highly complex insurable risks, in construc-

tion and oil & gas in particular. The global

reinsurance markets thereore oer pro-

tection to the local insurance industry by

reinsuring these large risks abroad. Fur-

thermore, even rom a risk management

perspective, the local insurance industry

Low insurance premium penetration rates, coupLed with high cession

rates to internationaL reinsurers, suggest the potentiaL of the

industry to grow significantLy over the next few years.

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interest in captive insurance is increasing because it is an efficient

means to deaLing with our environment of doubLe-digit economic

growth rates in combination with a higher compLexity in business and

associated risks.

seeks to diversiy and protect its balance

sheet by taking advantage o the global re-

insurance markets. Nevertheless, partly

as a refection o the growing maturity o

the GCC insurance markets, cession rates

show a declining trend. This is primarily

due to growth in compulsory personal lines,

which have lower cession rates. In addition,

lower cession rates refect improving riskmanagement capabilities.

Shashank intimated that changes in in-

surance penetration are refective o the

pace o growth o insurance relative to GDP

growth: an increasing insurance penetra-

tion refects the act that the insurance sec-

tor growth has outpaced GDP growth.

Although insurance premiums have ex-

panded at double-digit rates in Qatar, he

said, GDP grew even more rapidly over the

past ew years due to the increased LNG

capacity that was brought online. There-

ore, in 2011 Qatars insurance penetrationstood at 0.7%, a decline rom 1.0% in 2009.

But it is orecasted that total premiums will

more than double to QR7.6 billion ($2.1 bil-

lion) by 2016. So, the industry is set to grow

spectacularly, but whether this translates

into an increasing share in GDP remains to

be seen.

Captives

The QFCAs third strategic ocus is on cap-

tives. The development o the Middle East

as a centre or captives has been a talking

point or some time now, what with chang-

ing attitudes to risk management and themoderation o the recent global economic

crisis. In 2011, three-quarters o the Fortune

500 had captive insurance companies, while

the GCC region had only ten. Companies are

now looking at alternate ways to transer

their risk onto the markets, seeing it not as

a liability, but as an opportunity.

The GCC-based corporations consider

captives as viable solutions or their insur-

ance requirements and an integral part o

their overall risk strategy, says Srivastava.

In July 2011, the QFC Regulatory Authority

issued new regulatory rameworks applying

to captive insurers, captive managers and

insurance intermediaries, designed to sup-

port the development o Qatar as a regional

centre or captive insurance.

Interest in captive insurance is increas-

ing because it is an ecient means to deal-

ing with our environment o double-digit

economic growth rates in combinationwith a higher complexity in business and

associated risks. Inrastructure spending is

increasing, previously state-owned assets

are being privatised and regulatory require-

ments on transparency and disclosure are

rising. Finally, company managers and di-

rectors are becoming more sophisticated.

These actors augur well or the demand or

captive solutions in Qatar.

Srivastava concedes that it would take

some time or the world to amiliarise itsel

with this new environment.

For instance, some regional compa-nies have already reached a scale where it

would make sense or them to create their

own captives. However, there would be an

opposing orce to that in the sense that the

whole insurance industry has being going

through a sot cycle recently, which leads

to less risk capacity. So in that scenario, its

probably better to pass that risk on to the in-

dustry rather than do captives themselves.

They should wait or the right time in the

economic cycle, which isnt at this point in

time, he says.

Product oferingsMany o the global insurance investment

products are currently available in Qatar,

they just lack the maturity needed to be

properly quantied.. How urther along the

line is Qatar regarding the range o prod-

ucts that can be oered here? I there isnt

the demand or them, can they ever mature

here?

Diculties in quantiying loss trends,

or example, make it harder to price certain

products adequately, says Srivastava. This

is a recurrent phenomenon when indus-

tries emerge or innovations are launched,

because sometimes we still lack meaning-

ul time series as products have just sprung

into lie. As the industry grows, more reli-

able data become available and projecting

losses and pricing products should be less o

a challenge.

In addition, issues on the product devel-

opment and distribution side, such as accessto consumers, product innovation and risk

segmentation closely matching products

to the risks o the potential buyers argu-

ably hold the industrys growth back. How-

ever, these are common eatures o emerg-

ing insurance markets across the globe.

Most standard products in personal

and commercial lines are available here. In

general, insurance penetration and density

(i.e. insurance spend per capita) is still held

back. In personal lines, there are also some

religious and cultural reservations which

inhibit the growth o conventional lie in-surance, an issue which the industry tries

to tackle through Sharia-compliant Family

Takaul products. From an investors per-

spective there is still a lack o suitable long-

term nancial assets, especially high-quali-

ty bonds which insurers could use to cover

their long-term liabilities, he adds.

The product oerings, o course, depend

on the skill and technical ability o the

sta here. Is attracting talent a signicant

problem here?

Based on the GCC Insurance and Re-

insurance Barometers, which we issue

in alternation, twice a year, says Srivas-tava, the insurance executives participat-

ing in the survey pointed out that locally

available technical skills are inadequate. This

results in an extreme reliance on expatriate

sta. These deciencies extend to all major

areas o underwriting, claims management,

risk management and general manage-

ment. However, interestingly enough, many

respondents believe that insurers them-

selves can do a lot more to nurture local

talent and invest in the development o

management skills